Reverse Mortgages--Easy income for the older homeowner?

By
Managing Real Estate Broker with Broker (The Watz Team) Exit Strategy Realty

  We've all seen the commercials with the beloved (somewhat older) celebrities touting the new "Reverse Mortgage" for the older homeowner.

Seems like a great idea, but what are they REALLY getting into?

What a reverse mortgage boils down to, essentially, is tapping your equity. Homeowners (62 and older) can qualify for these if their homes are owned in full or nearly paid off. The homeowner can choose how they are paid with this reverse mortgage; monthly, as an open line of credit, or in one big payment. The homeowner retains title, just as they would with an equity loan.

Some Cautions and facts;

 During the actual term of the reverse mortgage, you don't have to do repayment. HOWEVER, there is interest charged, and it has to be paid in one lump sum at the end of the reverse mortgage.

 

 As long as the owners reside in the property and keep up insurance, taxes, and repairs, the reverse mortgage doesn't need payback. If they sell the house, die or move from the house for more than one year, the loan end of that reverse mortgage kicks in, and it will need to be paid back (again though, WITH INTEREST)

  The reverse mortgage is not fun money or living expense money. It's ideal for the homeowner that plans to STAY in the home, forgoing assisted living or nursing care.

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Rainer
120,115
Brian Schulte
Allison James Estates & Homes - Sierra Vista, AZ
SFR, Sierra Vista, AZ

Simply put:  If your house is compared to a bank account, the banker simply puts a lean on your bank account and charges you for the use of your own money. Maybe it would be better to just sell your home and live off your retirement income elsewhere.

If it were compared to an IRA, they put a lean on your IRA and when you want to start withdrawal, they get theirs 1st.

Think well!

http://www.BriansRealty.com

 

Sep 30, 2011 04:04 AM #1
Rainmaker
262,423
Kim & Kristine Halverson
Compass - Santa Monica, CA
Sisters, Realtors

Good info, thanks Vicki! Have you had any short sales with reverse mortgages?

Cheers,

Kim

Oct 03, 2011 11:30 AM #2
Rainmaker
144,602
Vicki Watzlawick
Broker (The Watz Team) Exit Strategy Realty - Algonquin, IL
Illinois Foreclosure Expert, The Watz Team
Yes Kim, I have completed 2 short sales with Reverse Mortgages. They went through just like the others. Brian, I agree with you, but have you tried to talk your grandmother out of the house she has lived in for 40 years? The emotional attachment, at this stage of the game is the biggest obstacle. I feel if they want to die broke and happy, god bless them! It is their right.
Oct 03, 2011 11:42 AM #3
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Rainmaker
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Vicki Watzlawick

Illinois Foreclosure Expert, The Watz Team
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